Ratio of Debt to Income
The ratio of debt to income is a formula lenders use to determine how much of your income is available for a monthly mortgage payment after you meet your other monthly debt payments.
How to figure the qualifying ratio
Usually, conventional mortgages need a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.
The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can go to housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, property taxes, and homeowners' association dues).
The second number is the maximum percentage of your gross monthly income that can be spent on housing expenses and recurring debt. Recurring debt includes things like vehicle payments, child support and monthly credit card payments.
For example:
28/36 (Conventional)
- Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
- Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses
With a 29/41 (FHA) qualifying ratio
- Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
- Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses
If you want to calculate pre-qualification numbers on your own income and expenses, use this Mortgage Loan Qualification Calculator.
Guidelines Only
Don't forget these are just guidelines. We'd be happy to pre-qualify you to determine how much you can afford.
Selectplus Lending can walk you through the pitfalls of getting a mortgage. Call us: (818)645-7035.